Monday, July 3, 2017

Resources that Pulled Russia Out of 1998 Catastrophe No Longer Available, Shelin Says

Paul
Goble

Staunton, July 3 – The situation
with the standard of living in Russia is not nearly as dire as it was at the
time of the 1998 default, Sergey Shelin says, and thus predictions of imminent
collapse should be dismissed. But at the same time, the resources that helped
Russia recover after default no longer are readily available if at all and so
coming out of this crisis will be harder.

The Rosbalt commentator argues that
Russians must come to understand that the current crisis in the economy and
standard of living is one of “a new type,” albeit one that is still “far from
that which was 20 years ago although potentially far more difficult to overcome
(rosbalt.ru/blogs/2017/06/30/1627288.html).

Unfortunately, Shelin continues, the
nature of the problem is concealed behind the often-contradictory statistics
offered by Rosstat, statistics that on the one hand point to growth in most sectors
even as they indicate that “real disposable monetary incomes of the population
continue to fall.”

A better way to consider the problem
is to focus on retail trade. In May 2017, this was only 86 percent of what it
had been on average in 2014, a figure that is likely exaggerated but is still
indicative.Over the same period, GDP
for the country as a whole fell about three percent. In short, “the people had
to pay much more than the economy lost.”

In order to understand what is going
on, Shelin says, it is useful to go back to the end of the 1990s. The low point
for Russians was at the time of the 1998 default. Current levels of
impoverishment do not begin to approach the lows of that time.But after default, there was a period of
rapid growth and improvement in the standard of living.

“Initially,” this growth was based
on the recovery of the economy as it had been, a development he describes as “healthy.”
But then it rose on the basis of “an unhealthy one,” the rapid influx of
petrodollars.They allowed “incomes to
rise even when the economy almost ceased to grow.”

“The authorities simply distributed
their earnings, increasing pensions, pay in the state sector and so on.” And
that allowed incomes to continue to rise not just to 2008 as many think “but
approximately to 2013.”The end of the oil
boom had a major impact, but sanctions and countersanctions were of secondary
importance.

“But the main thing that the popular
masses had to pay for was all the same not import substitution, although that
hit their pockets but the sharp growth of spending on the siloviki and the
necessity of simultaneously compensating our magnates for their oil losses.”
That means that the situation going forward is very different now than it was
in 1998.

The walls between rich and poor both
sectorally and geographically are far higher and more impermeable than they
were, and the dependence of the population on the generosity of the state is
also far higher. In the 1990s, Russians
sought to make their way on their own; now, they are less interested and able
to do so and are angry at anything they have to pay the state.

“The so-called informal sector
always existed. It typically did not bring particular wealth and flourishing.
But the formation of an enormous, stable and apparently already inherited
stratum of people who absolutely do not trust the state and do not want to pay
it anything and living outside its accounts is one of the numerous special
features of our time,” Shelin says.

Moreover, there is an additional
problem. Standards of living are not just monetary income, but the quality of
life, education and medical care.Not
only are all these things worse than they were but they are worse not just when
compared to the 1990s but to the “fat” years when everything seemed to be going
so well.

Recovery now will require a complete
reordering of state policy and public attitudes, neither of which will be easy
to change and each of which will tend to feed on the other and make a new
period of growth more difficult to achieve than that which followed the default
of 1998.